SP Rajan, Head - P&M RREC, L&T Construction.
We conduct enough field tests and other evaluations of the equipment before going full fledged introduction, says SP Rajan, Head - P&M RREC, L&T Construction.
What is the equipment selection process in your company?
In L&T Construction, the equipment selection process undergoes a thorough review of the technological developments, ease of after sales support, present strength of inventory, life cycle costing and the performance of present fleet, if available. If a new machine is introduced, field visits and factory visits are carried out to have a first-hand feel before the final decision is taken.
What are the safety features being considered, especially while selecting heavy machinery?
The safety to human interference is given utmost importance. The delay start mechanism, reverse cameras, reverse horns, GPS devices, operator seat adjustments, vibration suppression, better visibility, etc are given high importance.
What are the different categories, types and brands of construction equipment for which you are responsible?
All the machines meant for roads, runways, elevated corridors, etc are included the responsibilities.
Could you elaborate on the equipment applications for which you need to select equipment?
Paving equipment play vital role in producing quality roads, be it asphalt layers or concrete layers. So, we are keen to have machines with reputed past and best technology. In the process, we come across various options, indigenous as well as imported. It is the experience of the team and in-depth analysis that leads to the final conclusion.
What are the key considerations for equipment selection? Are you country specific?
As already mentioned, the technology, after sales support, safety parameters as well as life cycle costing play vital role in the selection of equipment. We are not country specific.
Do you have some brand preferences for specific equipment?
We are not brand specific.
Do you procure new, used or both categories of equipment? Could you elaborate on the same?
We procure new as well as used equipment. We have a very strong equipment department and central workshops having experience and equipment to rejuvenate the used machines and give it a new lease of life.
Now, in India, some auction houses have become active which are sources of used machinery. Some private firms are keen to diversify and thus their machines become available.
There are some organisations (mostly new entrants) who procure project-specific machines which become available after the completion of the project.
Some international firms and JVs do buy machines for specific projects and they are available with good health for reuse. Some international sources also support in used machinery procurement.
Do you conduct a rent versus buy analysis?
Yes, we conduct rent versus buy analysis for all strategic equipment.
What is the importance of Total Life Cycle and Total Cost of Ownership? How do you establish the same and what parameters you consider? Do you calculate these on current prices or do you incorporate an yearly price increase/escalation/inflation in your calculations?
We do carryout Total Life Cycle and Total Cost of Ownership for all the equipment. We consider operating costs, maintenance costs and residual value during lice cycle costing. This helps to take decisions when we compare two good brands with same quality.
Total Cost of Ownership is applied for project specific machines. In this case, we consider in addition to the above, the acquisition costs and depreciation.
Do you have tie-ups with the OEMs on operator´s training for new equipment you buy?
OEMs do provide exclusive training to our operators at the projects and their premises.
Do you give weightage to extra acquisition cost towards new technology, performance enhancing features, telematics, energy conservation, regeneration features and other such items? If yes, to what additional percentage compared to the cost of the equipment without such features?
Yes, we give weightage to new technology, performance enhancing features and others. At the same time, we need to be competitive in today´s environment. So, we conduct enough field tests and other evaluations before going full fledged introduction.
There is no limit to any budget when it comes to trying new technology. Any other information you wish to share to enable us understand your company philosophy in a better way.
The RTO related policies in India are not user friendly. Each state has its own policy leading to loss of time and money. A common policy across India can be a good relief to the construction companies.
´Acquisition cost is a prime factor influencing procurement decision.´
We seek guarantee from the manufacturer for breakdown attendance and for the availability of the machine for operation, says BB Mishra, Head - Procurement TIIC, L&T Construction.
Could you elaborate on the decision making process for equipment procurement in your company?
The procurement of capital item is centralised. The ICs (self-contained verticals) give their requirements which is processed by a centralised cell. Depending upon the duration and value of the equipment decision is taken either to go for hiring, outright purchase, buyback arrangements or rate contract.
Acquisition cost of equipment is a prime factor considered by procurement. What are the parameters for which you are willing a higher price? If so, to what extent?
Acquisition cost is one of the prime factors influencing procurement decision. However, the performance of the equipment, presence of after sales service and more importantly our experience with the brand plays a vital role in procurement decision making.
We pay higher price for equipment purely based on our judgment on the performance of the equipment over a period of time and the support of the equipment manufacturers for after sales service, availability of spares, etc.
The extent to which we are willing to pay higher price depending upon the availability of alternatives and will vary from equipment to equipment.
What are the procurement norms for establishing the Total Cost of Ownership of equipment?
We generally take into account the following parameters for obtaining the total cost of equipment:
What are the guaranties you seek from an equipment supplier?
We seek performance guarantee for a period backed by BG against manufacturing defects. We also seek guarantee from the manufacturer for breakdown attendance and for the availability of the machine for operation.
Do you seek guarantee for after sales maintenance, retrofit repairs and consumables?
For initial two years, we take performance guarantee backed by BG against any manufacturing defect and agreed output/productivity. After this period, based on the criticality, we may go far AMC/RC for spares and consumables.
What about operational consumables, like ground engaging tools, drill rods, drill bits and such other items?
Consumable and other tools are either covered by a rate contract or purchased like any other revenue item.
Do you seek comprehensive after sales maintenance contracts from the suppliers? Are these on sites or are they centrally governed?
As we have an experienced and adequate plant and machinery workforce, we have not gone for many comprehensive after sales contracts.
Do your purchase decisions get impacted by the available finance arrangements by various financiers who only finance to specific brands?
We have not opted for any financing mode for procurement of capital items.
Do you procure equipment on operating lease?
We have not opted for operating lease.
What are the non-negotiable terms of your purchase agreement?
Performance bank guarantee and liquidated damages are the non-negotiable terms.
What are the key challenges of procurement? How do you overcome this?
Some of the MNCs have insufficient Indian presence in terms of after sales service workforce and availability of critical spares. We tried to restrict the breakdown time to minimum by taking a guarantee from the OEM.